<PAGE>

             FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the quarterly period ended      March 31, 2001
                               -------------------------

                                       or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the transition period from _____________ to _______________

Commission File Number:   0-14745
                        --------------

                             SUN BANCORP, INC. (SUN)
                ------------------------------------------------
             (Exact name of registrant as specified in its charter)

                  Pennsylvania                             23-2233584
         --------------------------------              ------------------
         (State or other jurisdiction of                (I.R.S. Employer
         incorporation or organization)                Identification No.)

      PO Box 57, Selinsgrove, Pennsylvania                   17870
   -------------------------------------------          ----------------
    (Address of principal executive offices)               (Zip code)

                                 (570) 374-1131
              -----------------------------------------------------
              (Registrant's telephone number, including area code)

                                       N/A
               ---------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. /X/  Yes  / / No

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes /_/  No /_/

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.

   Common Stock, No Par Value                          6,610,874
-------------------------------------      ---------------------------------
            Class                          Outstanding Shares At May 8, 2001

<PAGE>

SUN BANCORP, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2001


CONTENTS

<TABLE>
<CAPTION>
                                                                                                       Page
                                                                                                       ----
<S>      <C>                                                                                           <C>
PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements:

          Consolidated Balance Sheet as of March 31, 2001 (Unaudited)
              and December 31, 2000                                                                       3
          Consolidated Statement of Income for the Three Months Ended
              March 31, 2001 and March 31, 2000 (Unaudited)                                               5
          Consolidated Statement of Cash Flows for the Three Months Ended
              March 31, 2001 and March 31, 2000 (Unaudited)                                               7

          Notes to the Consolidated Financial Statements (Unaudited)                                      9

Item 2 - Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                                                       13

PART II - OTHER INFORMATION

Item 4 - Submission of Matters to a Vote of Security Holders                                             19

Item 5 - Other Information                                                                               19

Item 6 - Exhibits and Reports on Form 8-K                                                                19

SIGNATURES                                                                                               21

Exhibit 1

</TABLE>
                                        2

<PAGE>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 1. Financial Statements

                                SUN BANCORP, INC.
                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
 (In Thousands)                                     March 31, 2001       December 31, 2000
                                                      (Unaudited)             (Note)
                                                   ---------------       ------------------
<S>                                                    <C>                     <C>
ASSETS

Cash and due from banks                                $ 12,255                $ 13,138
Interest-bearing deposits in banks                       54,001                   2,139
                                                       --------                --------

    Total cash and cash equivalents                      66,256                  15,277

Investment securities                                   286,817                 290,513
Loans, net of allowance for loan and lease
  losses of $5,315 in 2001 and $4,165 in 2000           417,405                 406,775
Bank premises and equipment, net                         11,260                  10,895
Intangible asset, goodwill-net                           12,136                   8,682
Accrued interest and other assets                        33,320                  11,446
                                                       --------                --------

    Total assets                                       $827,194                $743,588
                                                       ========                ========

</TABLE>

                                        3

<PAGE>



SUN BANCORP, INC.
FORM 10-Q
PART I

Item 1. Financial Statements

                                SUN BANCORP, INC.
                           CONSOLIDATED BALANCE SHEET
                                   (Continued)
<TABLE>
<CAPTION>

(In Thousands)                                         March 31, 2001      December 31, 2000
                                                         (Unaudited)            (Note)
                                                       --------------      -----------------

<S>                                                        <C>                 <C>
LIABILITIES & SHAREHOLDERS' EQUITY

Deposits
    Noninterest-bearing                                    $  45,838           $  39,164
    Interest-bearing                                         441,094             405,402
                                                           ---------           ---------

       Total deposits                                        486,932             444,566

Short-term borrowings                                         14,705               9,582
Other borrowed funds                                         222,000             222,000
Subordinated debentures                                       16,500                --
Accrued interest and other liabilities                        21,857               4,913
                                                           ---------           ---------

       Total liabilities                                     761,994             681,061
                                                           ---------           ---------

Shareholders' equity
    Common stock, no par value per share;
       Authorized 20,000,000 shares:
       issued 7,233,631 shares in 2001 and
       7,227,093 shares in 2000                               81,632              81,721
    Retained earnings (deficit)                              (10,399)            (11,177)
    Accumulated other comprehensive income (loss)                697              (1,591)
    Less: Treasury stock, at cost,
          599,965 shares in 2001 and
          566,440 shares in 2000                              (6,819)             (6,337)
                                                           ---------           ---------

       Total shareholders' equity                             65,200              62,527
                                                           ---------           ---------

       Total liabilities and shareholders' equity          $ 827,194           $ 743,588
                                                           =========           =========
</TABLE>

Note: The balance sheet at December 31, 2000 has been derived from the audited
      financial statements at that date but does not include all the information
      and footnotes required by accounting principles generally accepted in the
      United States of America for complete financial statements.

The accompanying notes are an integral part of these financial statements.

                                        4
<PAGE>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 1. Financial Statements

                                SUN BANCORP, INC.
                        CONSOLIDATED STATEMENT OF INCOME
                                   (UNAUDITED)

<TABLE>
<CAPTION>
(In Thousands, Except for Per Share Data)             For the Three Months
                                                         Ended March 31
                                                     ------------------------
                                                       2001            2000
                                                     -------          -------
<S>                                                  <C>              <C>
Interest and dividend income:
    Interest and fees on loans                       $ 8,669          $ 8,176
    Income from investment securities
       Taxable                                         4,154            4,218
       Tax exempt                                        240              252
       Dividends                                         399              281
    Interest on deposits in banks                        230                7
                                                     -------          -------

       Total interest and dividend income             13,692           12,934
                                                     -------          -------

Interest expense:
    Interest on deposits                               5,059            3,948
    Interest on short-term borrowings                    138              341
    Interest on other borrowed funds                   3,153            3,121
    Interest on subordinated debentures                  168             --
                                                     -------          -------

       Total interest expense                          8,518            7,410
                                                     -------          -------

Net interest income                                    5,174            5,524

Provision for loan and lease losses                      300              600
                                                     -------          -------

       Net interest income, after provision
         for loan and lease losses                   $ 4,874          $ 4,924
                                                     =======          =======
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                        5
<PAGE>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 1. Financial Statements

                                SUN BANCORP, INC.
                        CONSOLIDATED STATEMENT OF INCOME
                                   (UNAUDITED)
                                   (Continued)

<TABLE>
<CAPTION>
(In Thousands, Except for Per Share Data)               For the Three Months
                                                          Ended March 31
                                                  ------------------------------
                                                     2001               2000
                                                  ----------          ----------
<S>                                               <C>                 <C>
Other operating income:
    Service charges on deposit accounts           $      329          $      314
    Trust income                                         250                 210
    Net security gains                                   798                  15
    Income from insurance subsidiary                      71                  81
    Other income                                         160                 101
                                                  ----------          ----------
Total other operating income                           1,608                 721
                                                  ----------          ----------
Other operating expense:
    Salaries and employee benefits                     1,998               1,611
    Net occupancy expenses                               216                 179
    Furniture and equipment expenses                     321                 239
    Amortization of goodwill                             193                 189
    Expenses of insurance subsidiary                      55                  48
    Other expenses                                     1,313                 855
                                                  ----------          ----------
Total other operating expenses                         4,096               3,121
                                                  ----------          ----------
Income before income tax provision                     2,386               2,524
Income tax provision                                     613                 716
                                                  ----------          ----------
Net income                                        $    1,773          $    1,808
                                                  ==========          ==========
PER SHARE DATA
       Net income per share - Basic               $     0.27          $     0.27
                                                  ==========          ==========
       Weighted average number of shares
           outstanding - Basic                     6,641,725           6,790,632
                                                  ==========          ==========
       Net income per share - Diluted             $     0.27          $     0.27
                                                  ==========          ==========
       Weighted average number of shares
           outstanding - Diluted                   6,656,804           6,811,874
                                                  ==========          ==========
       Dividends paid                             $     0.15          $     0.24
                                                  ==========          ==========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                        6


<PAGE>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 1. Financial Statements

                                SUN BANCORP, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
(In Thousands)                                                                      For the Three Months
                                                                                        Ended March 31
                                                                                ----------------------------
                                                                                   2001               2000
                                                                                ---------           --------
<S>                                                                             <C>                 <C>
Cash flows from operating activities:
Net income                                                                       $  1,773           $  1,808
     Adjustments to reconcile net income to net cash (used in)
          provided by operating activities:
               Provision for loan and lease losses                                    300                600
               Provision for depreciation                                             222                194
               Amortization of goodwill                                               193                189
               Amortization and accretion of securities, net                           10                 48
               Net security gains                                                    (798)               (15)
               (Increase) decrease in accrued interest and other assets           (22,956)                21
               Increase (decrease) in accrued interest and
                 other liabilities                                                 16,944               (314)
                                                                                 --------           --------
                   Net cash (used in) provided by operating activities             (4,312)             2,531
                                                                                 --------           --------

Cash flows from investing activities:
     Proceeds from sales of investment securities                                  38,212              4,652
     Proceeds from maturities of investment securities                             10,960              4,212
     Cash acquired from branch acquisition                                         23,181               --
     Purchases of investment securities                                           (41,221)              (773)
     Net increase in loans                                                        (11,027)           (13,848)
     Capital expenditures                                                            (239)              (200)
                                                                                 --------           --------
                   Net cash provided by (used in) investing activities             19,866             (5,957)
                                                                                 --------           --------
Cash flows from financing activities:
     Net increase in deposits                                                      15,190              5,157
     Net increase (decrease) in short-term borrowings                               5,123            (21,768)
     Proceeds from other borrowed funds                                              --               50,000
     Repayments of other borrowed funds                                              --              (30,000)
     Proceeds from issuance of subordinated debentures                             16,500               --
     Cash dividends paid                                                             (995)            (1,629)
     Proceeds from sale of stock for employee benefits program                         89                 81
     Purchase of treasury stock                                                      (482)              (163)
                                                                                 --------           --------
                   Net cash provided by financing activities                       35,425              1,678
                                                                                 --------           --------

Net increase (decrease) in cash and cash equivalents                               50,979             (1,748)
Cash and cash equivalents at beginning of period                                   15,277             16,059
                                                                                 --------           --------
Cash and cash equivalents at end of period                                       $ 66,256           $ 14,311
                                                                                 ========           ========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                        7

<PAGE>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 1. Financial Statements

                                SUN BANCORP, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)
                                   (Continued)

<TABLE>
<CAPTION>
(In Thousands)                                            For the Three Months
                                                             Ended March 31
                                                         -----------------------
                                                          2001            2000
                                                         ------          -------
<S>                                                      <C>            <C>
Supplemental disclosure of cash flow information:
     Cash paid during the period for:

         Interest                                        $8,382          $7,300
                                                         ======          ======

         Income taxes                                    $  600          $  106
                                                         ======          ======

    Loans with an estimated value of $97,000 and $42,000
      were reclassified to foreclosed assets held for sale
      during the three month periods ended March 31, 2001
      and 2000, respectively.
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                        8

<PAGE>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 1. Financial Statements

                                SUN BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

Note 1 -- Basis of Interim Presentation

     The consolidated financial statements include the accounts of Sun Bancorp,
Inc. (Sun), the parent company, and its wholly-owned subsidiaries Sun Bank
(Bank), Pennsylvania Sun Life Insurance Company (Sun Life) and Sun Bancorp
Statutory Trust I. Sun also holds seventy-five percent ownership in Sun Abstract
and Settlement Services (Sun Abstract). The transactions of Sun Life and Sun
Abstract are not material to the consolidated financial statements. All
significant intercompany balances and transactions have been eliminated in
consolidation.

     The accompanying unaudited consolidated financial statements for the
interim periods do not include all of the information and footnotes required by
generally accepted accounting principles. However, in the opinion of management,
all adjustments necessary for a fair presentation of the results of the interim
period have been included. Operating results for the three months ended March
31, 2001 are not necessarily indicative of the results that may be expected for
the year ended December 31, 2001.

     The accounting policies followed in the presentation of interim financial
results are the same as those followed on an annual basis. These policies are
presented on pages 18 and 19 of the 2000 Annual Report to Shareholders.


                                        9
<PAGE>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 1.  Financial Statements

Note 2 - Net Income Per Share

     Net income per share is computed based on the weighted average number of
shares of stock outstanding for each quarter presented. Statement of Financial
Accounting Standards No. 128, "Earnings Per Share," requires presentation of two
amounts, basic and diluted net income per share.

     The following data shows the amounts used in computing net income per share
and the weighted average number of shares of dilutive stock options for the
periods ended March 31, 2001 and 2000:

<TABLE>
<CAPTION>
                                                               Common              Net
                                            Income             Shares            Income Per
                                           Numerator         Denominator           Share
                                           ---------         -----------         ----------
<S>                                       <C>                <C>                 <C>
2001
  Net income per share - Basic            $1,773,000           6,641,725          $   0.27
                                          ----------                              ========

  Dilutive effect of stock options                                15,079
                                                              ----------

  Net income per share - Diluted          $1,773,000           6,656,804          $   0.27
                                          ==========          ==========          ========

2000
  Net income per share - Basic            $1,808,000           6,790,632          $   0.27
                                          ----------                              ========

  Dilutive effect of stock options                                21,242
                                                               ---------

  Net income per share - Diluted          $1,808,000           6,811,874          $   0.27
                                          ==========           =========          ========
</TABLE>

                                       10

<PAGE>


SUN BANCORP, INC.
FORM 10-Q
PART I

Item 1.  Financial Statements

Note 3 - Comprehensive Income

     The purpose of reporting comprehensive income is to report a measure of all
changes in Sun's equity resulting from economic events other than transactions
with shareholders in their capacity as shareholders. For Sun, "comprehensive
income" includes traditional income statement amounts as well as unrealized
gains and losses on certain investments in debt and equity securities (i.e.
available for sale securities). Because unrealized gains and losses are part of
comprehensive income, comprehensive income may vary substantially between
reporting periods due to fluctuations in the market prices of securities held.
This is evidenced by the fact that Sun's net income decreased for the three
months ended March 31, 2001 compared to the corresponding period in 2000, but
comprehensive income over the same period has increased.

<TABLE>
<CAPTION>
(In Thousands)                                      For the Three Months
                                                       Ended March 31
                                                  --------------------------
                                                    2001              2000
                                                  --------           -------
<S>                                                <C>               <C>
Net income                                         $ 1,773           $ 1,808
                                                   -------           -------
Other comprehensive income:
   Unrealized holding gains on
       available for sale securities:
   Gains arising during the period                   4,264             2,520
   Reclassification adjustment - realized
       gains included in net income                   (798)              (15)
                                                   -------           -------
Other comprehensive income
   before income tax provision                       3,466             2,505

Income tax expense related to
   other comprehensive income                       (1,178)             (852)
                                                   -------           -------

Other comprehensive income                           2,288             1,653
                                                   -------           -------

Comprehensive income                               $ 4,061           $ 3,461
                                                   =======           =======
</TABLE>

                                       11

<PAGE>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 1.  Financial Statements

Note 4 - Investment Securities

     The amortized cost and fair value of investment securities at March 31,
2001 and December 31, 2000 were as follows:

<TABLE>
<CAPTION>
(In Thousands)                                                                   March 31, 2001
                                                          -----------------------------------------------------------------
                                                                                Gross           Gross
                                                            Amortized         Unrealized      Unrealized             Fair
                                                              Cost               Gains          Losses               Value
                                                          --------------      -----------    -------------         ---------
<S>                                                          <C>               <C>            <C>                  <C>
Debt securities:
     Obligations of U.S. government agencies                 $ 243,219         $   2,620      $    (621)           $ 245,218
     Obligations of states and political subdivisions           17,822               532            (13)              18,341
     Other corporate                                             6,760               221           --                  6,981
                                                             ---------         ---------      ---------            ---------
     Total debt securities                                     267,801             3,373           (634)             270,540
                                                             ---------         ---------      ---------            ---------
Equity securities:
     Marketable equity securities                                5,078                 1         (1,432)               3,647
     Restricted equity securities                               12,630              --             --                 12,630
                                                             ---------         ---------      ---------            ---------
     Total equity securities                                    17,708                 1         (1,432)              16,277
                                                             ---------         ---------      ---------            ---------
        Total                                                $ 285,509         $   3,374      $  (2,066)           $ 286,817
                                                             =========         =========      =========            =========

<CAPTION>
                                                                                     March 31, 2000
                                                          -----------------------------------------------------------------
                                                                                Gross           Gross
                                                            Amortized         Unrealized      Unrealized             Fair
                                                              Cost               Gains          Losses               Value
                                                          --------------      -----------    -------------         ---------
<S>                                                          <C>               <C>            <C>                  <C>
Debt securities:
     Obligations of U.S. government agencies                 $ 251,300         $   1,301      $  (2,353)           $ 250,248
     Obligations of states and political subdivisions           18,341               445            (33)              18,753
     Other corporate                                             5,277                87           (227)               5,137
                                                             ---------         ---------      ---------            ---------
     Total debt securities                                     274,918             1,833         (2,613)             274,138
                                                             ---------         ---------      ---------            ---------
Equity securities:
     Marketable equity securities                                5,376                 9         (1,640)               3,745
     Restricted equity securities                               12,630              --             --                 12,630
                                                             ---------         ---------      ---------            ---------
     Total equity securities                                    18,006                9          (1,640)              16,375
                                                             ---------         ---------      ---------            ---------
         Total                                               $ 292,924         $   1,842      $  (4,253)           $ 290,513
                                                             =========         =========      =========            =========
</TABLE>

                                       12
<PAGE>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations

     The following is management's discussion and analysis of the significant
changes in the results of operations, capital resources, and liquidity presented
in its accompanying consolidated financial statements for Sun Bancorp, Inc.
(Sun), a bank holding company, and its wholly-owned subsidiaries, Sun Bank
(Bank), Pennsylvania Sun Life Insurance Company and Sun Bancorp Statutory Trust
I. Sun also holds seventy-five percent ownership in Sun Abstract and Settlement
Services (Sun Abstract). Sun's consolidated financial condition and results of
operations consist almost entirely of the Bank's financial condition and results
of operations. This discussion should be read in conjunction with the 2000
Annual Report. Current performance does not guarantee or assure similar
performance in the future, and may not be indicative of future results.

     Sun's net income for the three months ended March 31, 2001 was $1,773,000
($0.27 per share basic and diluted) as compared to $1,808,000 for the three
months ended March 31, 2000 ($0.27 per share basic and diluted). The earnings
resulted in annualized return on average assets (ROA) for the three months ended
March 31, 2001 of .91% as compared to 1.02% for the three months ended March 31,
2000. Annualized return on average equity (ROE) for the three months ended March
31, 2001 was 11.27% as compared to 12.91% for the three months ended March 31,
2000.

     Management's ongoing efforts to improve credit quality resulted in a
significant improvement in the loan delinquency ratio (all loans past due),
which declined to 1.18% at March 31, 2001 from 1.30% at December 31, 2000 and
1.74% at March 31, 2000. In addition, Sun reported record levels of deposits and
total assets at March 31, 2001.

      Since the acquisition of Bucktail Bank and Trust Company on June 30, 1997,
generally accepting accounting principles require management to reflect the
effects of goodwill amortization expense on Sun's financial statements.
Excluding goodwill, Sun's ROA would be 1.02% and ROE would be 14.59%. For the
same period in 2000, excluding goodwill would have resulted in ROA of 1.14% and
ROE would be 17.11%

RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2001 AND 2000

     Net interest income decreased to $5,174,000 for the three months ended
March 31, 2001 as compared to $5,524,000 for the same period of 2000. Total
interest and dividend income increased $758,000 to $13,692,000 for the three
months ended March 31, 2001 as compared to 2000. Most of the increase, $493,000,
is the result of Sun's continued growth of the loan portfolio. Total interest
expense increased $1,108,000 to $8,518,000 for the three months ended March 31,
2001, as compared to 2000. The increase is the result of the growth in deposits
along with higher rates being paid on certificates of deposit. The provision for
loan and lease losses decreased 50.0% to $300,000 for the three months ended
March 31, 2001. The decrease is the result on Sun's continued emphasis on credit
quality as shown by the loan delinquency ratio decreasing to 1.18% at March 31,
2001 as compared to 1.74% at March 31, 2000.


                                       13
<PAGE>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations

     Total other operating income increased $104,000, excluding security gains,
for the three months ended March 31, 2001, compared to the same period of 2000.
Service charges on deposit accounts increased 4.8% to $329,000 for the three
months ended March 31, 2001. Trust income increased 19.0% to $250,000 for the
three months ended March 31, 2001. Other income increased $59,000 to $160,000
for the three months ended March 31, 2001. A majority of the increase is the
result of increased gains on other real estate sold of $40,000 along with
increased gains on the sale of loans.

     Other operating expenses increased to $4,096,000 for the three months ended
March 31, 2001, compared to $3,121,000 in the same period of 2000. Salaries and
employee benefits increased 24.0% to $1,998,000 for the three months ended March
31, 2001 as Sun continues to attract new employees to expand Sun's market area
coverage. As evidenced by Sun increasing the number of full time equivalent
employees, in anticipation of the future growth from the announced branch
acquisitions and the announced acquisition of Guaranty Bank, N.A., by 15.7% to
221 at March 31, 2001 as compared to March 31, 2000. Net occupancy and furniture
and equipment expenses increased 28.5% to $537,000 as Sun opened two new
branches in the Lewisburg area since March 31, 2000. In addition, Sun has been
investing in infrastructure improvements in preparation of the before mentioned
acquisitions. Other expenses increased $458,000 to $1,313,000 for the three
months ended March 31, 2001. The increase is the result of several factors.
First, during January 2001, Sun unified its four trade names under the common
name of SunBank. This did not come without several one-time charges. Sun was
required to expense $68,000 as the result of the disposal of old bank signs, and
Sub incurred expenses of $40,000 to provide the initial supply of new SunBank
items to all areas of the bank. Second, Sun has employed consultants to advise
management with regard to expanding Sun's infrastructure to pursue future
opportunities. Finally, there have been slight increases in other normal
business activities (including the FDIC assessment and the Pennsylvania Shares
Tax).

BALANCE SHEET - MARCH 31, 2001 AND DECEMBER 31, 2000

     Total assets were $827,194,000 at March 31, 2001, an increase of
$83,606,000 from $743,588,000 at December 31, 2000. Cash and cash equivalents
increased $50,979,000 or 333.7% from $15,277,000 at December 31, 2000. Nearly
half of the increase is from the acquisition of $23,181,000 in net cash though
the acquisition of a former Mellon branch in Lewisburg. The remaining increase
is the result of continued deposit growth along with the proceeds from the
issuance of trust-preferred securities. Investment securities decreased
$3,696,000 as Sun held the funds from maturities in cash while evaluating
investment options. The intangible asset, goodwill, was increased to $12,136,000
at March 31, 2001 as SUN incurred goodwill of $3,647,000 in acquiring the former
Mellon Lewisburg branch. Total liabilities increased $80,933,000, or 11.9% to
$761,994,000 at March 31, 2001. Total deposits increased 9.5% to $486,932,000 at
March 31, 2001. The Lewisburg branch acquisition represented 35.9% of the
increase with the remaining increase incurring in NOW and certificate of deposit
accounts. Total borrowed funds increased $21,623,000 to $253,205,000 at March
31, 2001, with subordinated debt representing $16,500,000 of the increase. The
subordinated debt is the result

                                       14
<PAGE>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations


of SUN issuing $16,500,000 in trust preferred securities in a private placement
offering. The bonds yield 10.2% and mature in thirty years and are callable in
ten years. In addition, the subordinated debt is accounted for as capital under
regulatory capital guidelines. Sun's total shareholders' equity increased
$2,673,000 from December 31, 2000 to March 31, 2001. The increase in
shareholders' equity is primarily the result of a change in accumulated other
comprehensive loss offset by the net income and dividends paid for the three
months ended March 31, 2001. In addition, Sun purchased 33,525 shares of
treasury stock with a cost of $482,000 over the past three months.

ALLOWANCE FOR LOAN AND LEASE LOSSES

     Losses on loans and leases are charged against the allowance in the period
in which they have been determined to be uncollectible. Recoveries of loans and
leases previously charged off are credited to the allowance as they are
received.

     The allowance for loan and lease losses is evaluated based on management's
assessment of the losses inherent in the loan portfolio. Factors used in this
evaluation include historical data on losses by loan type, the composition of
the loan portfolio, current economic conditions, and possible losses related to
specific loans. The monthly analysis of losses includes identifying loans where
the internal credit rating is at or below a predetermined level and includes
management's assumptions as to the ability of the borrowers to service the
loans. During this review, it is decided when certain loans should be charged
off and if additions to the allowance are necessary.

     The allowance consists of two components, the specific allocation and the
general allocation. The specific allocation reflects expected losses resulting
from the analysis of individual loans with internal credit ratings below a
predetermined level. The general allocation reflects management's evaluation of
the other factors, such as historical losses and current economic conditions in
the markets served by Sun. The general allocation also includes management's
determination of the amounts necessary for concentrations and changes in the mix
and volume of the loan portfolio. In addition to the management review, Sun
engages a consulting firm to perform an annual independent credit review of loan
relationships in excess of $250,000, and considers the results of this review in
determining the allowance.

     At March 31, 2001, management deems the allowance to be adequate; however,
future additions may be necessary based on economic, market, or other
unforeseeable conditions, or if required by banking regulatory agencies.
Although management makes its best estimate as to the additions to the
allowance, there can be no assurance future material additions may not be
needed.

                                       15
<PAGE>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations

EQUITY SECURITIES RISK

     Sun's equity securities portfolio consists of restricted stock (FHLB),
investments in stocks of other banks and bank holding companies, mainly based in
Pennsylvania, and several holdings of non-bank companies.

     FHLB stock can only be sold back to the FHLB. Accordingly, Sun's investment
in FHLB stock is carried at cost, which equals par value, and is evaluated for
impairment. Factors that might cause FHLB stock to become impaired (decline in
value on an other than temporary basis) are primarily regulatory in nature and
are related to potential problems in the residential lending market; for
example, the FHLB may be required to make dividend or other payments to the
Financing Corporation, the Resolution Funding Corporation, or other entities, in
amounts that could exceed the FHLB's total equity.

     Investments in bank stocks are subject to the risk that factors affecting
the banking industry generally, including competition from non-bank entities,
credit risk, interest rate risk, and other factors, could result in a decline in
market prices. Also, losses could occur in individual stocks held by Sun because
of specific circumstances related to each bank. Further, because of the
concentration of its holdings in Pennsylvania banks, these investments could
decline in value if there were a downturn in the state's economy. Sun's
management continually monitors its risk associated with its equity securities.


     Equity securities held as of March 31, 2001 and December 31, 2000

<TABLE>
<CAPTION>
                                           March 31, 2001
                                        ----------------------
                                                        Fair
                                         Cost           Value
                                        -------        -------
<S>                                     <C>            <C>
Banks and bank holding companies        $ 4,991        $ 3,568
FHLB stock                               12,630         12,630
Non-bank companies                           87             79
                                        -------        -------
      Total                             $17,708        $16,277
                                        =======        =======

<CAPTION>
                                          December 31, 2000
                                        ----------------------
                                                        Fair
                                         Cost           Value
                                        -------        -------
<S>                                     <C>            <C>
Banks and bank holding companies        $ 5,289        $ 3,651
FHLB stock                               12,630         12,630
Non-bank companies                           87             94
                                        -------        -------
      Total                             $18,006        $16,375
                                        =======        =======
</TABLE>

                                       16
<PAGE>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations

CAPITAL ADEQUACY

     Sun's strong capital position is evidenced by the following capital ratios,
which are well above the regulatory minimum levels.

<TABLE>
<CAPTION>
(In Thousands)                                                    For Capital
                                               Actual          Adequacy Purposes
                                       ----------------------  -----------------
                                       Amount           Ratio         Ratio
                                       ------           -----         -----
<S>                                    <C>              <C>           <C>
As of March 31, 2001:
Total Capital                          $73,234          16.2%          8.0%
   (to Risk Weighted Assets)
Tier I Capital                         $51,418          11.4%          4.0%
   (to Risk Weighted Assets)
Tier I Capital                         $51,418           6.7%          4.0%
   (to Average Assets)

As of December 31, 2000:
Total Capital                          $59,303          15.0%          8.0%
   (to Risk Weighted Assets)
Tier I Capital                         $54,356          13.7%          4.0%
   (to Risk Weighted Assets)
Tier I Capital                         $54,356           7.5%          4.0%
   (to Average Assets)
</TABLE>

                                       17
<PAGE>

SUN BANCORP, INC.
FORM 10-Q
PART I

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations

REGULATORY AND INDUSTRY MERGER ACTIVITY

     From time to time, various types of federal and state legislation have been
proposed that could result in additional regulation of, and restrictions on, the
business of Sun and SunBank. It cannot be predicted whether such legislation
will be adopted or, if adopted, how such legislation would affect the business
of Sun and SunBank. As a consequence of the extensive regulation of commercial
banking activities in the United States, Sun's and SunBank's business is
particularly susceptible to being affected by federal legislation and
regulations that may increase the costs of doing business. Except as
specifically described above, management believes the effect of the provisions
of legislation on the liquidity, capital resources, and results of operations of
Sun will be immaterial. Future recommendations by regulatory authorities or
proposed legislation, which if they were implemented, would have a material
adverse effect upon the liquidity, capital resources, or results of operations,
although the general cost of compliance with numerous and multiple federal and
state laws and regulations does have, and in the future may have, a negative
impact on Sun's results of operations.

     Further, the business of Sun is also affected by the state of the financial
services industry in general. As a result of legal and industry changes,
management predicts the industry will continue to experience an increase in
consolidations and mergers as the financial services industry strives for
greater cost efficiencies and market share. Management also expects increased
diversification of financial products and services offered by SunBank and its
competitors. Management believes such consolidations and mergers, and
diversification of products and services may enhance its competitive position as
a community bank.

                                       18

<PAGE>

SUN BANCORP, INC.
FORM 10-Q
PART II

Items 1, 2, and 3 -- Omitted pursuant to instructions to Part II

Item 4 -- Submission of Matters to a Vote of Security Holders

           a.  Sun Bancorp, Inc. held its 2001 Annual Meeting on Thursday,
               April 26, 2001. See Exhibit 1 for complete Certificate of
               Judges of Election.

           b.  This information is incorporated by reference to Exhibit 1, item
               number one. Those directors whose term of office continued after
               the meeting are:

           Max E. Bingaman                           David R. Dieck
           Stephen J Gurgovits                       Louis A. Eaton
           Robert A. Hormell                         Dr. Robert Funk
           Howard H Schnure                          George F. Keller
           Robert J. McCormack                       Dennis J. Van
           Martha A. Barrick                         George E. Logue, Jr.
           M. Mitchell Fetterolf                     Fred W. Kelly, Jr.
           Thomas B. Hebble                          Paul R. John

          b.   This information is incorporated by reference to Exhibit 1

          c.   None

Item 5 -- Other information

     The registrant's Board of Directors announced the authorization or the
repurchase of up to 709,209 shares or 9.9% of the outstanding shares of Sun
Bancorp, Inc. after the settlement of the Guaranty Bank, N.A. acquisition which
is scheduled for May 31, 2001. The prior stock buyback plan announced in June
2000 will terminate on that date. The purchased shares will be used for general
corporate purposes.

     On April 26, 2001, the Board of Directors approved a quarterly dividend
payment of $.15 per share for shareholders of record May 25, 2001, payable June
8, 2001.

Item 6 -- Exhibits and Reports on Form 8-K

          a.   On January 8, 2001 the Registrant filed an 8-K announcing an
               agreement to purchase the Lewisburg, Pennsylvania branch of
               Mellon Bank.

          b.   On January 16, 2001 the Registrant filed an 8-K announcing the
               entering into a definitive agreement to acquire Guaranty Bank,
               N.A. through a merger of Guaranty with, into, and under the
               charter of SunBank.

          c.   On February 5, 2001 the Registrant filed an 8-K announcing an
               agreement to purchase the Mill Hall and Lock Haven, Pennsylvania
               branches of Mellon Bank.

                                       19
<PAGE>

SUN BANCORP, INC.
FORM 10-Q
PART II

Item 6 -- Exhibits and Reports on Form 8-K

          d.   On April 26, 2001 the Registrant filed an 8-K announcing the
               authorization to repurchase up to 709,209 shares during 2001,
               which represents an additional 9.9% of the outstanding shares
               after settlement of the Guaranty Bank, N.A. acquisition.

          e.   On April 27, 2001 the Registrant filed an 8-K announcing the
               appointment of Robert J. McCormack to Chief Executive Officer of
               Sun Bancorp, Inc. and SunBank.


                                       20


<PAGE>


SUN BANCORP, INC.
FORM 10-Q
PART II

                                   SIGNATURES


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                                    Sun Bancorp, Inc.

Date   5/14/01                                 /s/  Robert J. McCormack
     ----------------------              -------------------------------------
                                                  Robert J. McCormack
                                         President and Chief Executive Officer
                                               (Principal Executive Officer)


                                                /s/  Jonathan J. Hullick
                                         -------------------------------------
                                                  Jonathan J. Hullick
                                          Exec. V.P. & Chief Financial Officer
                                            (Principal Financial Officer and
                                              Principal Accounting Officer)



Sun Bancorp, Inc.
PO Box 57
Selinsgrove, PA  17870
(570) 374-1131

                                       21